Nine Entertainment Co
chief
David Gyngell
could end up with more than $25 million worth of shares as the company’s hedge fund owners prepare to meet on October 21 to finalise how much of the business they will sell into the float.

Fund managers have been told Nine stock will make up a large part of Mr Gyngell’s remuneration, with the chief executive expected to hold a 1 to 2 per cent stake in the free-to-air television, ticketing and digital group after a sharemarket float slated for early December.

It is believed Mr Gyngell’s stock will be placed in an escrow account and cannot be traded for three years after the listing, expected to capitalise the company at between $2.5 billion and $3 billion.

That would mean Mr Gyngell’s holding in the company could be worth as much as $60 million.

Perpetual head of equities
Matt Williams
said it was a positive move that would align the interests of management with those of new shareholders.

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Nine’s hedge fund owners, led by Oaktree Capital Management with 24.1 per cent of the company and Apollo Global Management with 19 per cent, are expected to gather at a shareholder meeting on October 21 to finalise how much of the group they will retain after the float.

All shareholders are set to receive documentation in the next couple of weeks detailing how they can opt in or out of their holdings in Nine.

The document is also expected to set out earnings forecasts and pricing detail for the company. An escrow period for their shares is also expected to be finalised at the meeting.

Oaktree and Apollo, who seized control of Nine in a $2.3 billion debt-for-equity swap late last year, are likely to be the only hedge funds to place any shares in escrow.

Other contenders

Nine’s other major shareholders include Goldman Sachs, which has a 5.3 per cent stake and Silver Lake Partners, with 4.8 per cent.Private equity firm CVC Asia Pacific paid $5.6 billion between 2006 and 2008 to buy the business from James Packer but lost almost all of its money in the debt restructure. It retains a tiny stake.

Marathon Asset Management, GE Capital and Korea’s Shinhan Bank are among others with a stake in Nine, which had 86 creditors turned into shareholders as part of the debt ­restructure.

Wilson Asset Management chairman Geoff Wilson said Mr Gyngell holding a stake in the company was positive but it would not serve as a substitute for Nine’s hedge fund owners also keeping stock after the float.

“The greater percentage management and directors own of a company the more alignment with shareholder’s interests," he said. “It is a slight positive but if the hedge funds were going to keep a reasonable holding it would send a much stronger message to the market that the capital was being raised is a fair valuation."

Equity Trustees chief investment officer George Boubouras said the amount of shares to be held by Mr ­Gyngell and the associated escrow period should be a benchmark for IPOs in the future. “The market is preparing for surge of IPO activity in the next six to nine months and this is good benchmark for the other IPOs out there at the moment," he said.

BT Investment Management analyst Sondal Bensan said in relation to Mr Gyngell holding shares in Nine after the float: “Two per cent is good but it would be interesting to see what he actually had before that."

It is believed Nine recorded earnings before interest tax, depreciation and amortisation of $256 million in 2012-13.

The group could be expected to post EBITDA of closer to $300 million in 2013-14 (on an annualised basis) once earnings from the Perth and Adelaide stations that Nine bought from regional broadcaster WIN Corporation this year are included.

Mr Gyngell has told fund managers he does not expect the free-to-air advertising market to improve materially after several years of decline.